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Note 12 - Stockholders' Equity
 12 Months Ended
Dec. 31, 2012
Stockholders' Equity Note Disclosure [Text Block]
NOTE 12 – STOCKHOLDERS’ EQUITY

Authorized shares

The Company is incorporated in the State of Delaware and has 50,000,000 authorized shares of Common Stock, $0.01 par value per share (the “Common Stock”), and 1,000,000 authorized shares of Preferred Stock, $0.01 par value per share (the “Preferred Stock”).

Warrants to purchase common stock

Warrants issued to Rho and Prentice

During 2012, the Company issued warrants to each of Rho and Prentice in connection with the 2012 financing.  Refer to Note 9 – 2012 Financing for further discussion.

Warrants issued to consultant

In October 2011, the Company issued a warrant to a consultant to purchase 150,000 shares of Common Stock in exchange for marketing services and vests equally over six months.  Warrants were granted to this consultant with terms not to exceed ten years and become exercisable at the end of each vesting term.  In determining the fair value of such warrant, the Company used the Black-Scholes option pricing model to calculate the value of the warrant.  The assumptions used were as follows:

Risk-free interest rate
    2.42 %
Expected life (in years)
    10.00  
Dividend yield
    0.00 %
Expected volatility
    93.20 %

Expected volatility was based on the historical volatility of the price of the Company’s Common Stock, measured over the same period of time as the remaining maturity life of the warrants.  The risk free interest rate was based on the interest rate for U.S. Treasury Notes having a maturity period equal to the remaining maturity life of the warrants.

Using the above assumptions, a value of $2.00 per share was assigned to the warrants, which is amortized through the vesting term and recorded as part of marketing expenses.  For the years ended December 31, 2012 and 2011, the Company recognized expense of $200,000 and $100,000, respectively, related to the warrants issued to this marketing consultant.

Warrants issued to Soros and Maverick

The Company has issued warrants to Quantum Industrial Partners LDC (“QIP”), and/or, SFM Domestic Investments LLC (“SFM” and, together with QIP, “Soros”), Maverick Fund USA, Ltd. (“Maverick USA”), Maverick Fund, L.D.C. (“Maverick Fund”) and Maverick Fund II, Ltd. (“Maverick Fund II” and, together with Maverick USA and Maverick Fund, “Maverick”) in connection with past financings.  All expenses related to these warrants have been fully amortized.

The following table represents warrants issued to purchase Common Stock that are outstanding as of December 31, 2012:

Party
 
Number of
Warrants
   
Exercise Price
Range (Per Share)
 
Expiration Dates
Rho
    476,190         $1.05    
August 2019
Prentice
    476,190         $1.05    
August 2019
Consultant
    150,000         $2.28    
October 2021
Soros
    34,086       $5.10 – $7.80  
March 2013
Maverick
    19,796         $5.10    
March 2013
Various holders
    1,115       $5.10 – $7.80  
March 2013
      1,157,377                

Stock-Based Compensation Plans

The Company’s Board of Directors has adopted three stock-based employee compensation plans, of which one plan expired in December 2012.  The Plans, which provide for the granting of restricted stock awards, deferred stock unit awards, stock option awards and other equity and cash awards, were adopted for the purpose of encouraging key employees, consultants and directors who are not employees to acquire a proprietary interest in the growth and performance of the Company.

Stock Option Awards

The following table summarizes the Company’s stock option award activity:

   
Number of
Shares
 
Weighted Average
Exercise Price
(Per Share)
 
Balance at December 31, 2009
   
207,760
     
9.09
 
Stock option awards granted
   
1,904,348
     
2.40
 
Stock option awards cancelled
   
(21,000
)
   
3.92
 
Stock option awards exercised
   
--
     
--
 
Balance at December 31, 2010
   
2,091,108
     
3.05
 
Stock option awards granted
   
1,109,134
     
2.42
 
Stock option awards cancelled
   
(385,915
)
   
2.75
 
Stock option awards exercised
   
(17,645
)
   
1.87
 
Stock option awards expired
   
(1,500
)
   
15.83
 
Balance at December 31, 2011
   
2,795,182
     
2.84
 
Stock option awards granted
   
2,072,260
     
1.36
 
Stock option awards cancelled
   
(633,911
)
   
2.60
 
Stock option awards exercised
   
--
     
--
 
Stock option awards expired
   
(27,650
)
   
9.27
 
Balance at December 31, 2012
   
4,205,881
     
2.11
 
                 
Vested at December 31, 2010
   
520,908
     
5.00
 
                 
Vested at December 31, 2011
   
901,341
     
3.76
 
                 
Vested at December 31, 2012
   
1,956,156
     
2.73
 

The stock option awards are exercisable in different periods through 2022.  Additional information with respect to the outstanding stock option awards as of December 31, 2012, is as follows:

   
Options Outstanding
 
Options Exercisable
 
                           
Range of Exercise Prices
 
Options
Outstanding
 
Weighted
Average
Remaining
Contractual
Life
(years)
 
Weighted
Average
Exercise
Price
Per Share
 
Options
Exercisable
 
Weighted
Average
Exercise
Price
Per Share
 
Weighted
Average
Remaining
Contractual
Life
(years)
 
                                           
$0.51 – $2.50    
3,523,003
   
8.6
 
$
1.80
     
1,613,976
   
$
2.32
   
7.6
 
$2.51 – $5.00    
615,628
   
7.6
   
2.78
     
274,930
     
2.89
   
7.0
 
$5.01 – $7.50    
--
   
--
   
--
     
--
     
--
   
--
 
$7.51 – $10.00    
6,750
   
3.5
   
8.71
     
6,750
     
8.71
   
3.5
 
$10.01 – $12.50    
27,000
   
3.0
   
11.96
     
27,000
     
11.96
   
3.0
 
$12.51 – $15.50    
33,500
   
2.3
   
12.84
     
33,500
     
12.84
   
2.3
 
                                               
$0.51 – $15.50    
4,205,881
   
8.3
   
2.11
     
1,956,156
     
2.73
   
7.4
 

The total fair value of the 1,199,685 stock option awards that vested during the year was approximately $1,971,000.  At December 31, 2012, there was no aggregate intrinsic value of the fully vested stock option awards and the weighted average remaining contractual life of the stock option awards was approximately seven years. The Company has not capitalized any compensation cost, or modified any of its stock option awards and no cash was used to settle equity instruments granted under the Company’s equity incentive plans for the years ended December 31, 2012, 2011 and 2010.

There were no stock option awards exercised for each of the years ended December 31, 2012 and 2010.  For the year ended December 31, 2011, proceeds received from the exercise of stock options was approximately $33,000.

Other selected information is as follows:

   
2012
 
2011
 
2010
                         
Aggregate intrinsic value of outstanding options
 
$
76,000
   
$
53,000
   
$
935,000
 
                         
Aggregate intrinsic value of options exercised
   
--
     
6,000
     
--
 
                         
Weighted average fair value per share of options granted
   
0.91
     
1.77
     
2.28
 

As of December 31, 2012, the total compensation cost related to non-vested stock option awards not yet recognized was $2,274,000. Total compensation cost is expected to be recognized over approximately three years on a weighted average basis.

The fair value of stock option awards granted is estimated on the date of grant using a Black-Scholes option pricing model. Expected volatilities are calculated based on the historical volatility of the Company's Common stock. Management monitors stock option exercises and employee termination patterns to estimate forfeiture rates within the valuation model. The expected holding period of options represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the expected life of the option is based on the interest rate of the U.S. Treasury note in effect on the date of the grant.

The table below presents the weighted average assumptions used to calculate the fair value of stock option awards granted for the year ended December 31, 2012, 2011 and 2010, respectively:

   
2012
   
2011
   
2010
 
                   
Risk-free interest rate
    0.87 %     1.88 %     2.39 %
Expected life (in years)
    5.2       6.7       5.5  
Dividend yield
    0.00 %     0.00 %     0.00 %
Expected volatility
    81.02 %     82.42 %     84.07 %

For the years ended December 31, 2012, 2011 and 2010, the Company recognized expense of approximately $1,895,000, $1,058,000 and $611,000, respectively, in connection with these awards.

Restricted Stock and Deferred Stock Unit Awards

The following table is a summary of activity related to restricted stock awards and deferred stock units awards for key employees at December 31, 2012:

     
Restricted
Stock
Awards
 
Weighted Average
Grant Date
Fair Value
(per share)
 
Deferred
Stock
Unit Awards
 
Weighted Average
Grant Date
Fair Value
(per share)
Balance at December 31, 2009
   
8,437
   
$
0.92
     
12,314
   
$
12.70
 
Shares / units granted
   
8,062
     
2.25
     
--
     
--
 
Shares / units forfeited
   
(1,500
)
   
1.49
     
(51
)
   
12.70
 
Shares / units restriction lapses
   
(7,687
)
   
0.94
     
(12,263
)
   
12.70
 
Balance at December 31, 2010
   
7,312
     
2.25
     
--
     
--
 
Shares granted
   
--
     
--
                 
Shares forfeited
   
--
     
--
                 
Shares restriction lapses
   
(7,312
)
   
2.25
                 
Balance at December 31, 2011
   
--
     
--
                 
Shares granted
   
22,321
      1.12                  
Shares forfeited
   
--
      --                  
Shares restriction lapses
   
--
      --                  
Balance at December 31, 2012
   
22,321
      1.12                  
                                 
Aggregate grant date fair value
 
$
21,000
           
$
--
         
                                 
Vesting service period of shares granted
   
1 year
             
12 – 36 months
         
                                 
Number of shares / units vested during December 31, 2010
   
7,687
             
12,263
         
                                 
Number of shares non-vested at December 31, 2010
   
7,312
             
--
         
                                 
Number of shares vested during December 31, 2011
   
7,312
             
--
         
                                 
Number of shares non-vested at December 31, 2011
   
--
             
--
         
                                 
Number of shares vested during December 31, 2012
   
--
             
--
         
                                 
Number of shares non-vested at December 31, 2012
   
22,321
             
--
         

For the years ended December 31, 2012, 2011 and 2010 the Company recognized expense of approximately $12,000, $4,000 and $23,000, respectively, in connection with these awards.

As of December 31, 2012, the total compensation cost related to non-vested restricted stock awards not yet recognized was $15,000. Total compensation cost is expected to be recognized over less than one year on a weighted average basis.

September 2011 Securities Purchase Agreement

On September 7, 2011, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Rho, QIP and Prentice (the “Purchasers”) pursuant to which the Company sold to the Purchasers 3,666,665 newly issued shares (the “Shares”) of its Common Stock, for an aggregate purchase price of $6,600,000, or $1.80 per share.  The Company received proceeds from the sale of Shares of Common Stock of approximately $6,418,000, net of $182,000 of issuance costs.

2011 Registration Rights and Warrants Issuance

The Company, Soros, Prentice, Maverick and Rho (the “Existing Stockholders”) previously entered into a registration rights agreement, dated December 31, 2009 (the “Prior Agreement”).

In connection with the Purchase Agreement, the Company and the Existing Stockholders agreed to amend and restate the Prior Agreement (the “Amended and Restated Registration Rights Agreement”) to among other things, grant the Purchasers registration rights with respect to the Shares equivalent to those provided under the Prior Agreement.  Accordingly, the Company has agreed to file a shelf registration statement with respect to the Shares, and subject to the receipt of stockholder approval, issue warrants to the Purchasers under certain circumstances relating to the unavailability of a registration statement, and to register the shares underlying the warrants.

Pursuant to the Amended and Restated Registration Rights Agreement, the Company has agreed to file the shelf registration statement no later than November 15, 2011 (the “Filing Deadline”) and to cause such registration statement to be declared effective by the Securities and Exchange Commission within 180 days following Filing Deadline (the “Required Effectiveness Deadline”). The Amended and Restated Registration Rights Agreement provided that the Company would be obligated to issue warrants to the Purchasers in certain circumstances if the registration statement was not filed by the Filing Deadline or declared effective by the Required Effectiveness Deadline.

In accordance with the terms of the Amended and Restated Registration Rights Agreement, the Company would be required to grant the Purchasers warrants representing the right to purchase shares of its Common Stock in an aggregate amount equal to 1% of the fully diluted outstanding shares of Common Stock for each full 30-day period following the Filing Deadline or the Required Effectiveness Deadline (as applicable); provided however, that such warrant issuance shall not exceed, in the aggregate 10% of the fully diluted outstanding shares of Common Stock.  The warrants, if issued under the Amended and Restated Registration Rights Agreement, would have a 5-year term, an exercise price of $1.80 per share of Common Stock and would include customary provisions requiring adjustments of the number of shares of Common Stock issuable thereunder following a stock dividend, stock split or other similar adjustment to the Company’s capital structure.

The Company has filed the shelf registration statement with the Securities and Exchange Commission covering the September 2011 Shares on November 14, 2011 and the shelf registration statement was declared effective on February 7, 2012.  As the registration statement was filed within the Filing Deadline and declared effective within the Required Effectiveness Deadline, the Company did not record any amounts in the consolidated financial statements with regards to warrants for 2011.